Morgans has placed a hold recommendation on infant formula and organic baby food company Bubs Australia Ltd (ASX: BUB) as its shares take a dive down 7.2% to 83c at the time of writing.
Bubs operates in the highly-competitive baby formula space – dominated by peers like Bellamy's Australia Ltd (ASX: BAL) and A2 Milk Company Ltd (ASX: A2M).
Bubs has recently logged a number of new supply agreements with distributors in China's off-line and online sales channels, most notably a partnership with QianJiaWanPu Co – a licensed manufacturer which will allow it to commence its CFDA application for its China-labelled infant formula products.
Bubs shares were placed in a voluntary trading halt on June 14 pending a company announcement and today reported a successful capital raising of $40 million at 75c per share.
Morgans has an 82c per share price target on the stock with an upgrade to its FY19/20 forecasts by 3.2% and 12.5% respectively off the back of new contract activity with the comment that Bubs management is making "solid progress" and "building a sustainable business".
